How do I finance my new vehicle if I have bad credit?
Financing a new vehicle is rarely easy, but it can be especially difficult if you have bad credit. However, you shouldn’t let your subpar credit score stand in the way of you getting a new vehicle! Here are our answers to some frequently asked questions about financing a new car with bad credit.
What is the best bank or lender for people with bad credit?
If you have bad credit, you should consider using a credit union instead of a larger commercial bank. Credit unions are owned by their members instead of shareholders, so all profits go back into offering lower fees and borrowing costs to you. Also, since credit unions are often smaller and more community-oriented, and don’t have to worry about keeping shareholders or a parent company happy, they’re often more forgiving of bad credit, and more willing to approve members with less than perfect credit scores for loans.
Can I explain why I have bad credit?
Yes! Sometimes, unexpected or extenuating circumstances can leave you with a bad credit score that doesn’t truly reflect your ability to repay a loan on time. If you’ve had a medical emergency or other circumstances that negatively affected your credit score, you can and should offer that explanation. You can attach a 100-word statement to any credit inquiry, and providing that kind of context can make the difference between whether you get approved or not.
Would it help to find a co-signer?
Absolutely. Having a co-signer is one of your surest bets for getting a loan with bad credit. The most important thing to remember about having a co-signer, though, is that now your credit score isn’t the only one on the line. If you fail to make payments on time or default on your loan, it can seriously bring down your co-signer’s score, so make sure you’re absolutely certain you can stay on top of your payments before you commit to this!
What about my home equity? Can I use that to get a loan?
If you have equity in your home, you can absolutely use that as collateral in a loan! A home equity loan is different from a regular loan, and don’t take your credit score into account, so they can be a good option for someone with bad credit. Just be very careful about over extending yourself with these loans; failure to repay a home equity loan puts your property at risk.
Should I just wait to get a new car until I have a better credit score?
Having a bad credit score shouldn’t force you to put your life on hold, and you don’t need to wait for yours to improve to finance a new car. Working to improve your score, however, is always a good idea, and it’s something you can do while you make payments on a new vehicle.
We hope these frequently asked questions have helped you in your efforts to finance your new vehicle! If you have more specific questions, give us a call or stop by at one of our many Mr. Ed locations!